For better or worse, professional baseball has long enjoyed an exemption from the antitrust laws.1 The scope of this exemption — a judge-made rule premised upon dubious rationales2 and labeled an "aberration" by the Supreme Court3 — has been the subject of extensive litigation over the years. In this case, we are called upon to address two key issues: (1) the effect of the federal rule upon state antitrust law and (2) whether the exemption extends beyond antitrust prosecutions into the realm of mere investigations. With regard to the first issue, we hold that the federal exemption preempts state antitrust law. As for the second issue, we hold that the Florida Attorney General cannot proceed with the investigation in this case. This holding is based upon the Fourth Amendment4 and state law rather than the antitrust exemption. In this vein, our analysis differs significantly from that of the district court, although we ultimately affirm its decision.

Major League Baseball ("MLB") is an unincorporated association of thirty major league baseball clubs. On November 6, 2001, a supermajority of the clubs voted in favor of eliminating two teams from the league. The Florida Marlins and the Tampa Bay Devil Rays voted in favor of contraction. The former Attorney General of Florida, Robert Butterworth, is a fan of baseball, but not of MLB's contraction policy. According to one newspaper, Butterworth proclaimed that "[i]t's not going to be easy for baseball to leave the state of Florida.... We finally got a team in Tampa Bay, and we're going to do all we can to keep it." See Joe Follick, State Starts Battle Over Contraction, The Tampa Trib., Nov. 14, 2001. Similarly, Butterworth is reported to have said, "I'm out here to do whatever I can do to keep [baseball] in Florida if at all possible." See Lesley Clark & Clark Spencer, Baseball Cutback Plan Challenged, The Miami Herald, Nov. 25, 2001. Making good on his promise, the Attorney General issued several civil investigative demands ("CIDs") to Major League Baseball, Commissioner Allan H. Selig, the Tampa Bay Devil Rays, Ltd., and the Florida Marlins Baseball Club, LLC — all of whom are plaintiffs in this case. The CIDs were issued pursuant to the Attorney General's authority under Florida's antitrust statute, Fla. Stat. § 542.28.5 The CIDs were broad in scope, requiring that each recipient answer several interrogatories6 and produce voluminous documents.7

The recipients of the CIDs had several options available, but only one option could yield the desired result. The most obvious option would have been to comply with the terms of the CIDs. But this option was unattractive because the CIDs were burdensome, and the recipients believed that the federal exemption gave them a "federal right" to be free not only from antitrust prosecution, but also from this investigation. Second, the recipients of the CIDs could have filed suit in state court pursuant to Fla. Stat. § 542.28(3)-(5)8 under the theory that since the business of baseball is immune from antitrust prosecution, the Attorney General's investigation is baseless and therefore flunks the "grand jury" and "Florida Rules of Civil Procedure" tests established by subsections (3)(a) and (3)(b), respectively. This option was similarly unattractive because Commissioner Selig, MLB, and the two Florida clubs would have found it impossible to convince a Florida trial court to adopt the first premise of the argument—namely, that the "business of baseball" is immune from antitrust prosecution. This is because the Supreme Court of Florida held in an earlier decision that the antitrust exemption established by federal law extends only to the reserve system9 rather than broadly exempting the "business of baseball." See Butterworth v. Nat'l League of Prof'l Baseball Clubs, 644 So. 2d 1021 (Fla. 1994).10 This left option three: an action in federal court, the present lawsuit.

The plaintiffs' complaint is based upon two theories. Under the first theory, the plaintiffs contend that (a) there is a "federal right" that exempts "the business of baseball" as a proper subject of an antitrust enforcement suit and (b) this federal right extends to administrative investigations. We call this the "penumbra" theory because, like Justice Douglas's theory of the Bill of Rights,11 the claim posits that a core federal right (i.e., exemption from antitrust prosecution) has a shadow which extends the right to encompasses much more (i.e., an exemption from antitrust investigation). Having established this broad federal right, the plaintiffs argue that this right precludes the Attorney General's investigation. This is so even if the state investigation is premised solely upon state antitrust law, because state antitrust law, to the extent that it is applied to the business of baseball, is preempted by federal law and violates the Commerce Clause.12

The plaintiffs also invoke another model. Like the penumbra theory, the second model continues to argue that federal law exempts the business of baseball from antitrust regulation, and that the Supremacy Clause and the Commerce Clause preclude the application of state antitrust law to the extent that state law is inconsistent with federal policy. Unlike the penumbra theory, however, the second theory does not contend that an exemption from prosecution necessarily includes an exemption from investigation. Rather, law external to federal antitrust doctrine precludes the Attorney General's investigation. Since the Attorney General could not possibly bring a suit on the grounds that contraction constitutes anticompetitive behavior in violation of federal or state antitrust laws, any investigation must be premised on the notion that the Attorney General is free to investigate perfectly legal activity. The plaintiffs allege that this premise is incorrect in light of Florida law13 and the Fourth Amendment,14 which prohibit baseless "fishing expeditions."

Invoking both theories, the plaintiffs seek declaratory and injunctive relief under 42 U.S.C. § 1983,15 in addition to an order setting aside the CIDs pursuant to Fla. Stat. § 542.28(3). The district court could have properly exercised federal question jurisdiction16 over the section 1983 claims, and it could have exercised its supplemental jurisdiction17 over the claims arising under Florida law.

The district court granted much of the requested relief, holding that the antitrust exemption covers the business of baseball and that state antitrust laws do not apply to the proposed contraction. The district court further held that "the Attorney General had no authority to issue antitrust CIDs to investigate the proposed contraction of Major League Baseball." Major League Baseball, 181 F.Supp.2d at 1335. The legal basis for the latter conclusion is unclear, because no authority was cited by the district court. However, we have two clues that lead us to suspect that the court adopted the penumbra theory. First, the court's final order completely ignored the plaintiffs' claims based on Fla. Stat. § 542.28(3) and made no mention of the Fourth Amendment. Second, the final order declared that "the federal and state antitrust laws do not apply to the proposed contraction of Major League Baseball from 30 to 28 and do not authorize investigation of that proposed contraction by the Attorney General." That is, the district court appears to have believed that the right to be exempt from an antitrust investigation inherently flows from the exemption itself.

As we discuss below, we believe that the district court made an analytical mistake and that the court should have considered the plaintiffs' claims based upon the Fourth Amendment and Fla. Stat. § 542.28(3). But the court's instincts were correct: the law prohibits baseless "fishing expeditions," and so an exemption from prosecution necessarily would have required the district court to prohibit the Attorney General's investigation. We therefore affirm the court's judgment in favor of the plaintiffs.

We ordinarily review a district court's decision to grant or deny an injunction for clear abuse of discretion. See United States v. Gilbert, 244 F.3d 888, 908 (11th Cir.2001). Underlying questions of law, however, are reviewed de novo. See United States v. Pruitt, 174 F.3d 1215, 1219 (11th Cir.1999) ("A district court by definition abuses its discretion when it makes an error of law.") (citation omitted); Manning ex rel. Manning v. School Bd. of Hillsborough County, Fla., 244 F.3d 927, 940 (11th Cir.2001). The decisions of the district court that the Attorney General challenges in this appeal were all reached as a matter of law. Accordingly, de novo review is appropriate.

The "business of baseball" is exempt from the federal antitrust laws. See Fed. Baseball Club of Baltimore, Inc. v. Nat'l League of Prof'l Baseball Clubs, 259 U.S. 200, 42 S. Ct. 465, 66 L. Ed. 898 (1922); Toolson v. New York Yankees, Inc., 346 U.S. 356, 74 S. Ct. 78, 98 L. Ed. 64 (1953); Flood v. Kuhn, 407 U.S. 258, 92 S. Ct. 2099, 32 L. Ed. 2d 728 (1972); Prof'l Baseball Schools and Clubs, Inc. v. Kuhn, 693 F.2d 1085 (11th Cir.1982). The district court persuasively established this fact, and the Attorney General no longer contends that the federal exemption extends only to the player reserve system. Instead, the Attorney General argues that the exemption has limits. Specifically, the Attorney General contends that the exemption might not be triggered if the facts established by the impending investigation show that the plaintiffs engaged in non-exempt conduct.

The Attorney General's position is no doubt correct, but what conduct could possibly be non-exempt? It is true that the antitrust exemption has not been held to immunize the dealings between professional baseball clubs and third parties. This case, however, does not involve third parties. Rather, the issue of contraction concerns a matter that is central to baseball's league structure—specifically, the number of clubs that may participate in league play. We agree that the decision to contract is obviously part of the "business of baseball"; the number of clubs, and their organization into leagues for the purpose of playing scheduled games, are basic elements of the production of major league baseball games. Moreover, the number of clubs necessarily affects the number of clubs sharing in national revenues. As the district court stated, "It is difficult to conceive of a decision more integral to the business of major league baseball than the number of clubs that will be allowed to compete." Major League Baseball v. Butterworth, 181 F. Supp. 2d 1316, 1332 (N.D.Fla.2001). When the applicability of baseball's exemption is so apparent, no factual development is necessary. See Prof'l Baseball Schools, 693 F.2d at 1085-86 (affirming, as a matter of law, a motion to dismiss where the dismissal was based upon an application of the exemption to antitrust challenges to a minor league franchise location system and game scheduling rules).

But what if club owners agreed not to eliminate the two clubs slated for elimination in the event that a locality chooses to subsidize a team, such as by paying for its stadium? Surely such a scheme, the Attorney General argues, is not covered by the exemption. We disagree. Nobody disputes the notion that money is at the core of the contraction issue. While the most die-hard baseball fans might fancy the sport as a mere pastime, most people understand that professional sports is big business and that profits matter most. So it would not be surprising if unprofitable baseball clubs were permitted to remain in otherwise unattractive markets in the event of a public bail-out. But this does not mean that a decision regarding the number of teams that may participate in league play is somehow unrelated to the "business of baseball." Federal antitrust law exempts the contraction issue from judicial scrutiny, and no inquiry into MLB's motives or desires could possibly change the fact that contraction implicates the heart of the "business of baseball."18

The Attorney General of Florida next contends that even if the business of baseball is immunized from federal antitrust prosecution, state enforcement agencies can still invoke state antitrust law. The argument is that the federal exemption is not really an "exemption" as such, but merely a realm where the federal antitrust laws do not operate. The federal exemption, the Attorney General says, is merely a "gap in, rather than an exemption to, federal antitrust law." What is meant by this crafty wording is not entirely clear, but we get the drift: the business of baseball should be viewed as an area in which Congress has refrained from federal antitrust regulation, and therefore states should have free reign to apply their antitrust laws so long as states are mindful of the Commerce Clause balancing test enunciated in Pike v. Bruce Church, Inc., 397 U.S. 137, 142, 90 S. Ct. 844, 847, 25 L. Ed. 2d 174 (1970) ("Where the statute regulates even-handedly to effectuate a legitimate local public interest, and its effects on interstate commerce are only incidental, it will be upheld unless the burden imposed on such commerce is clearly excessive in relation to the putative local benefits.") (citations omitted). The Attorney General argues that the Pike balancing test can be applied only after an investigation is completed and a more developed record emerges.

The plaintiffs respond by arguing that Flood, in conjunction with the Supremacy Clause, makes the business of baseball immune from inconsistent state laws. Moreover, the plaintiffs contend that the Supreme Court's Commerce Clause jurisprudence, when applied to professional baseball, must be read to establish a unique per se rule that prohibits the application of state antitrust laws when the federal exemption is triggered. Since balancing is unnecessary, a developed record is also unnecessary.

Any discussion of whether Congress meant to immunize the business of baseball from all antitrust law (as opposed to federal antitrust law) is, of course, fanciful because Congress never conveyed its preference one way or the other. The exemption is entirely judge-made, although some decisions have attempted to cloak this disturbing fact in the language of congressional intent. Our analysis must turn to the critical language utilized by the Supreme Court in Flood:

The petitioner's argument as to the application of state antitrust laws deserves a word. [The district court] rejected the state law claims because state antitrust regulation would conflict with federal policy and because national "uniformity (is required) in any regulation of baseball and its reserve system." The Court of Appeals, in affirming, stated, "[A]s the burden on interstate commerce outweighs the states' interests in regulating baseball's reserve system, the Commerce Clause precludes the application here of state antitrust law." As applied to organized baseball, and in the light of this Court's observations and holding in Federal Baseball, in Toolson, in Shubert, in International Boxing, and in Radovich, and despite baseball's allegedly inconsistent position taken in the past with respect to the application of state law, these statements adequately dispose of the state law claims.

Flood, 407 U.S. at 284-85, 92 S. Ct. at 2113 (citations omitted).

Hardly a model of clarity, the passage forces the reader to ask two questions. First, was this passage a holding? We answer in the affirmative, even though the declaration that "these statements adequately dispose of the state law claims" is far from the forceful language characteristic of most holdings. The context of the opinion makes clear that the Court was rendering a decision with respect to an important issue in the case. Indeed, the very next sentence after the quoted passage states: "The conclusion we have reached makes it unnecessary for us to consider the respondents' additional argument...." Id. at 285, 92 S. Ct. at 2113.

Second, what were the Court's grounds for precluding the application of state antitrust law? A careful reading of the passage yields two different theories. The district court, as characterized by the Supreme Court, held that federal policy exempts the business of baseball from antitrust scrutiny, and that state antitrust regulation inherently conflicts with this policy. That is, the district court advanced a preemption theory. The district court's holding is in considerable tension with the usual standard for preemption — a federalism-based doctrine that requires courts to "assum[e] that the historic police powers of the States [are] not to be superseded by ... [federal laws] unless that [is] the clear and manifest purpose of Congress." Rice v. Santa Fe Elevator Corp., 331 U.S. 218, 230, 67 S. Ct. 1146, 1152, 91 L. Ed. 1447 (1947). After all, the exemption is entirely judge-made, so one would be hard-pressed to find a clear statement from Congress in favor of preemption. Even so, the Supreme Court endorsed the district court's statement, and we are bound by the Court's holding.19

The Second Circuit Court of Appeals, by contrast, relied upon the Commerce Clause. There is an interesting question as to whether Commerce Clause doctrine, when applied to the business of baseball, precludes the application of state antitrust law per se, or whether the traditional Pike balancing test must be invoked on a case-by-case basis. The plaintiffs argue that some courts have erected a per se rule, even though the Second Circuit decision endorsed by the Flood Court employed the Pike balancing test. Fortunately, we need not answer this question because our Supremacy Clause analysis disposes of the question at hand: federal law establishes a universal exemption in the name of uniformity.20

So far, we have established two key points. First, contraction is an issue that is at the heart of the "business of baseball"; therefore, contraction cannot be the subject of an antitrust enforcement action predicated upon federal law. Second, the plaintiffs are also immune from state antitrust laws by virtue of the Supremacy Clause. Confronted with these two legal conclusions, the Attorney General responds by arguing that even if federal law precludes an antitrust prosecution, this does not mean that a mere investigation cannot be conducted. We agree, but our agreement with the Attorney General on this point does not end the matter.

First, it is far from axiomatic that exemptions from prosecution necessarily entail a concomitant right to be free from investigation. The Second Circuit, for example, held that a company could not invoke the Noerr-Pennington antitrust exemption21 as a basis for withholding materials sought through a CID issued by the U.S. Department of Justice. See Associated Container Transp. (Aus.) Ltd. v. United States, 705 F.2d 53, 59 (2d Cir. 1983). The court emphasized that there is a distinction between a prosecution, from which a business could be protected by the judge-made antitrust exemption, and a mere investigation into corporate conduct:

[T]he appellees are not resisting formal antitrust charges and cannot, therefore, simply rely on a doctrine which protects from prosecution businesses seeking to influence the enforcement of laws. To prevail on this appeal, appellees must demonstrate not that their conduct may be immune from prosecution, but rather that their communications with the Federal Maritime Commission are beyond the scope of legitimate inquiry.

Id. In a similar vein, the Fourth Circuit held that Noerr-Pennington petitioning immunity "is by definition an exemption from antitrust liability, and not a bar to discovery of evidence." North Carolina Elec. Membership Corp. v. Carolina Power & Light Co., 666 F.2d 50, 53 (4th Cir.1981).

Second, antitrust exemptions must be strictly construed. See Square D Co. v. Niagara Frontier Tariff Bureau, Inc., 476 U.S. 409, 421, 106 S. Ct. 1922, 1929, 90 L. Ed. 2d 413 (1986). This rule has its roots in the principle that the antitrust laws form the bedrock of our capitalist system premised upon competition, and that anticompetitive conduct harms consumer welfare. For this reason, judge-made exemptions, no less than statutory exemptions, must be closely cabined. We are hesitant to read the "business of baseball" exemption broadly — especially since the Supreme Court has called the exemption an "aberration."22 Therefore, we reject the penumbra theory proffered by the plaintiffs and adopted by the district court.

In advancing the penumbra theory, the plaintiffs point out that the business-of-baseball exemption is not riddled multiple exceptions, distinguishing it from Noerr-Pennington petitioning immunity. It makes no sense, the plaintiffs contend, to allow an investigation into conduct that we know is perfectly legal before the investigation commences. We agree with this sentiment, although we find it more appropriate to locate the right to be free from baseless investigations (commonly referred to as "fishing expeditions") in other sources of law rather than the antitrust exemption itself.

The Fourth Amendment has been held to limit the scope of investigatory power exercised by federal and state agencies. In See v. City of Seattle, 387 U.S. 541, 544, 87 S. Ct. 1737, 1740, 18 L. Ed. 2d 943 (1967), for example, the Court described the constitutional limits on administrative subpoenas:

It is now settled that, when an administrative agency subpoenas corporate books or records, the Fourth Amendment requires that the subpoena be sufficiently limited in scope, relevant in purpose, and specific in directive so that compliance will not be unreasonably burdensome.

See also United States v. Morton Salt Co., 338 U.S. 632, 652-53, 70 S. Ct. 357, 368-69, 94 L. Ed. 401 (1950); FTC v. Am. Tobacco Co., 264 U.S. 298, 305-06, 44 S. Ct. 336, 337, 68 L. Ed. 696 (1924). To be sure, Congress and state legislatures may permissibly grant broad investigative authority to regulatory agencies. See Okla. Press Publ'g Co. v. Walling, 327 U.S. 186, 204-05, 66 S. Ct. 494, 503, 90 L. Ed. 614 (1946). But investigations premised solely upon legal activity are the very type of "fishing expeditions" that were the target of Justice Holmes's assault in American Tobacco.

Like federal constitutional law, Florida law prohibits the Attorney General from conducting baseless investigations. See Fla. Stat. § 542.28(3); cf. Check 'N Go of Florida, Inc. v. State, 790 So. 2d 454, 457-58 (Fla.Dist.Ct.App.2001) ("The level of proof required of the investigative agency must suggest something more than a fishing expedition, and something less than probable cause."). Section 542.28 establishes two standards that CIDs must meet. First, CIDs must be set aside if they fail to meet the "standards applicable to subpoenas or subpoenas duces tecum issued by a court of [Florida] in aid of a grand jury investigation." Fla. Stat. § 542.28(3)(a). Second, CIDs must be set aside if they fail to meet the "standards applicable to a discovery request under the Florida Rules of Civil Procedure, to the extent that the application of such standards to any such demand is appropriate and consistent with the provisions and purposes of this chapter." Fla. Stat. § 542.28(3)(b). It is clear that under either standard, the Attorney General must have more than a mere intuition that illegal activity is afoot.23 This position is further advanced by the language of Fla. Stat. § 542.27(3), which requires that the Attorney General "suspect" that a violation has taken place before an investigation may commence, and Flat Stat. § 542.28(1), which requires that the Attorney General have "reason to believe" that a person "may be in possession ... of any documentary material" that is "relevant to a civil antitrust investigation" prior to the issuance of any CIDs. In short, it is clear that an investigation predicated solely upon legal activity does not pass muster under any standard.

The death of the business-of-baseball exemption would likely be met with considerable fanfare, save for the club owners who benefit from the rule. The exemption was founded upon a dubious premise,24 and it has been upheld in subsequent cases because of an equally dubious premise.25 Moreover, the welfare losses stemming from the potentially anticompetitive agreements among professional sports clubs have been well documented. See, e.g., Stephen F. Ross, Antitrust Options to Redress Anticompetitive Restraints and Monopolistic Practices by Professional Sports Leagues, 52 Case W. Res. L. Rev. 133 (2001). Finally, antitrust law has significantly changed since Federal Baseball was decided; per se rules have often been jettisoned in favor of the "rule of reason" — a balancing exercise that would uphold conduct that, while appearing anticompetitive at first blush, proves to be essential for maintaining a successful league-based enterprise. In this vein, we do not fault the position taken by some courts, and the arguments proffered by the Attorney General, that the exemption should be extremely narrow. Even so, we believe that a good faith reading of Supreme Court precedent leaves us no choice but to reach the following conclusions: First, contraction is a matter that falls within the "business of baseball" and therefore cannot be the subject of a prosecution based upon federal antitrust law. Second, when the business-of-baseball exemption is triggered, baseball clubs are equally immune from prosecution under state antitrust law. Finally, because the act of contraction (or an agreement to contract) cannot possibly violate state or federal antitrust laws, an investigation based solely upon contraction is baseless and therefore violates the Fourth Amendment and Florida law — both of which limit the scope of the Attorney General's authority to issue investigative subpoenas. It is up to the Supreme Court or Congress to overrule Flood outright, or perhaps devise a more cabined exemption. As an intermediate appellate court, we have no choice but to hold that the district court was correct in granting judgment in favor of the plaintiffs.

AFFIRMED.